Mid East IT feels the downturn

By WILLIAM MILLER DUBAI
While the numbers are far from the hundreds of thousands grabbing the headlines in the financial newspapers in the West, the Middle East has seen its fair share of job losses in the information technology sector. No company has been spared - not even Compaq, IBM or Sun Microsystems. The list goes on and on. Gateway shut down its overseas operations, which left its own casualties. And several others have put a freeze on recruitment.

For those lucky enough to survive the cull, they are looking at an immediate future where their bonuses and perks will be slashed. For the personnel and the companies involved, this has proved to be even more harrowing, as this is the first time that the region has witnessed IT layoffs.

According to a senior human resources manager with one of the PC majors, "It would be sheer ignorance to think that the Middle East can remain immune to what is now a global occurrence. Companies will have to look at their bottom line and expenses will be trimmed wherever they can. But at the same time, we will do everything that is possible to mitigate the suffering for those who have been made redundant."

All through the early 1990s and up until early 2001, the region's IT sector was on a hiring spree, notching up annual growth rates of 50 percent and higher. Not any longer. While the industry may still be expanding in the double-digit territory, individual growth rates for the leading IT companies are either flat or - worse - in a state of accelerated decline.

The numbers. It is against this backdrop that personnel costs have shot up to an extent that something clearly had to give. And it did. Conservative industry estimates place the number of IT-related job losses in the Gulf region at around 1,500-2,000 during the second half of 2001. And it's not just the big boys that have sustained major losses.

Across the Middle East, the channel trade has also taken some seriously heavy hits, including closures of some once-prominent names in the reseller market. In the UAE, a leading systems integrator, Seven Seas, laid off 30 employees in 2001. Many others went through the same process, but were not as forthcoming with figures. Add to that the job losses caused by the demise of the various dotcoms that sprung up at the height of the global mania, and you are left with a fairly substantial figure.

Many of those retrenched by the vendors are now looking for opportunities in the reseller segment - a big blow, not just in terms of stature but also salary. Indeed, the going has not been easy, according to one such candidate trying to make the transition after having been employed by Digital, Compaq and IBM in a short, checkered career in the IT industry.

Analysts are also looking very closely at what lies ahead for the regional operations of Hewlett-Packard (HP) and Compaq once their merger is ratified. Since its entry into the region in 1998, HP has expanded its regional profile with new office openings in key markets. In the case of a merger - given the present market conditions - the chances of a major revision to staff numbers are very real, says a senior source at Compaq.

"When Compaq acquired Digital in 1998," said the official, "with a few exceptions, we were able to absorb many of our counterparts in Digital's regional office because this was basically integrating two different processes. But with HP, that argument will not hold."

Only those employees who can bring money to the table may be considered vital. Others, including possibly whole divisions, are being construed as costs, said a senior manager at a software firm. Despite the current bleakness of the regional IT sector, however, some companies are taking the long view. According to Yasser Zeineldin, the marketing manager at Microsoft Gulf, which has 238 employees, "Microsoft has actually increased its workforce at a time when other companies have resorted to job cuts. We are always looking at optimizing these resources under all circumstances," says Zeineldin. "We strongly believe our continued success is dependent on the people that we employ, and we have a well-defined, long-term policy when it comes to recruitment."

Early indicators for 2002 suggest that it could be the second-tier IT vendors that will be releasing staff in the months ahead. At any rate, the glory days of the Middle East IT sector appear to be a thing of the past, a fact that's especially obvious to the region's newly redundant.